Monday, February 28, 2011

HAPPY AND HIGH RETURNS FOR FOREIGN MF INVESTORS

Indian capital markets have been thrown open to foreign investors in a bold move of the budget announced on 28 February 2011. This means that as an individual foreigner, you can now invest in Mutual Funds (MFs). Earlier, only Foreign Institutional Investors (FIIs) could invest while individual foreign investors could not.

Now individual foreigners can rake in high returns from investing in MFs. The highest returns come from MFs when compared to investing in fixed deposits or in Indian stocks. Let’s invest Rs 100,000 ($2,216 or € 1,603 at current rates) in these three options. If you put down a fixed deposit of Rs 100,000 for one year, your total amount with interest will rise to Rs 113,000 after one year and Rs 174,000 after five years. If you invest Rs 100,000 in equity, after one year your investment will more than double to Rs 226,000 and in five years, it will rise further to Rs 278,000. Now, if you invest Rs 100,000 in MFs, it will go up to Rs 176,000 after one year more than triple to Rs 358,000 after five years with less risk than equities.

So how do you invest in MFs? You need to do some initial paperwork. First, you have to obtain a PAN (Permanent Account Number) Card. Then, you need to complete ‘Know Your Customer’ or KYC procedure.

A PAN Card is required for all their financial investments over Rs 50,000 in India. The card is issued by the Income Tax department and UTI, UTIISL or NSDL (www.incometaxindia.gov.in. www.utiisl.co.in or tin.nsdl.com) who are authorized to process these applications. You can download the application form at these sites. The simple form asks for your full name, residential and business address, age, nationality and the name and address of your representative in India. The proof of your name and address must be attested by the Indian Mission in your country of residence. Attach two attested photos and send it to your representative in India for processing at the addresses given on the web. Or, it can be sent through your investment broker or advisor. The fee for processing a PAN application, for dispatch outside India, is Rs.744.00. This is composed of application fee Rs.94 (Rs.85 Processing Fee Charges + Rs.9 Service Tax) plus overseas dispatch charges.

'Know Your Customer' process is to prevent money laundering. For this process, you need to fill the KYC form at nil fees. In addition to your name, age, nationality, address, occupation and income details, the KYC form has a mandatory requirement for your PAN number and its copy. Your recent photo and proof of address is required and it must be attested by the Indian Consulate or a legal notary public in the country of your residence. The form has detailed notes that you should read carefully before filling it. The KYC approval takes from one to three months. After your PAN card and KYC, you can send your investment for Mutual Funds with a draft from your overseas account through your financial advisor, at www.abundanze.com.